John Grobe, a former fed and benefits specialist, crunch some numbers you need to know before you retire from a federal career.
When people close in on their retirement date many become anxious about life after a steady, biweekly paycheck. The old Civil Service Retirement System provided a much more generous pension/annuity than the Federal Employees Retirement System, which covers most working feds. So what to do?
We asked John Grobe, a former fed and benefits specialist, to crunch some numbers — the numbers you need to know before you retire. Grobe will be our guest today on our Your Turn radio show, which airs 10 a.m. EDT on www.federalnewsradio.com or on 1500 AM in the D.C. metro area. He sent us this preview of the “Rule of 7 Rules”:
“Rules — we follow them, we complain about them, and they influence our decisions in many areas of our life. Not all rules are requirements. Many are suggestions as to a particular way to behave or act. Today, we’re going to look at rules/suggestions that govern our financial decisions.”
“Have 3 months to a year’s income set aside in an easily accessible emergency fund,” Grobe said. “As federal employees, we have enviable job security. Perhaps the only job that is more secure is that of a METRO escalator repairer in Washington, D.C. Even though federal employment is a little less secure today than it was in the past, we won’t be surprised by a sudden layoff or reorganization.
“There are rules that govern RIFs and reorganizations, so we will have ample advanced notice of any actions that will affect our future employment. As feds, three months’ income set aside in an emergency fund should be adequate.
“The percentage of stocks in your investments should be 100 minus your age. This rule, if followed, would have you reducing your exposure to stocks as you age. If you were age 55, you would have 45% of your investments in stocks and 55% in fixed income. If you follow this suggestion, you will have a higher percentage of stocks in your TSP than you would if you were in the L Funds. The L Income Fund, which, according to the TSP, is for those who need their money now, is 20 percent stocks and 80 percent fixed income — primarily [the G Fund].
“On the other hand, many financial advisers suggest that retirees hold higher percentages in stock investments than either this rule or the L funds would have you hold. Many years ago, Charles Schwab, in his book ‘You’re Fifty, Now What?,’ suggested that retirees in their 60s still hold about 80 percent of their investments in stocks.”
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Mike Causey is senior correspondent for Federal News Network and writes his daily Federal Report column on federal employees’ pay, benefits and retirement.
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